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On Wednesday, Germany........>

GERMAN AUCTION PREVIEW
GERMAN AUCTION PREVIEW: On Wednesday, Germany sells E3bln of the 10Y bmk, 0.5%
Aug-27 
- BACKGROUND: There is a vague correlation between yield level an bid-cover
ratios on the 10Y but yields are 8bp below the 0.48% of the previous auction.
Next week Germany sells 2048 maturity paper and the final 10Y Bund of 2017 is on
6 December.
- RV/HISTORY: Spreads to Germany have compressed significantly in the past weeks
and so it could be argued that German debt offers good value. Also, on the
positive side of the auction ledger is the 115bp 2-10Y spread, the fairly steep
5-10Y spread and the near maximum spread of 16.2bp to the CTD into the bund
contract. There is an ample number of spreads that makes this Bund look cheap.
On the other side, the spread to USTs and also the swap curve looks less
attractive. At the previous 10Y auction, the yield was 0.48%. the 6 auction
average bid-cover ratio is 1.5x (Buba calc) and 1.21x including the retained
amount.
- RESULTS: Auction results are due shortly after bidding close at 1030GMT.

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